In a normal accounting period, an allocated amount of indirect cost is $700 and an actual amount is $800, then this can be classified as ____________?
Correct answer: A. under allocated indirect cost
- A. under allocated indirect cost
- B. over allocated direct cost
- C. over allocated budget
- D. under allocated budgetAccounting & Auditing
Explanation
Indirect cost is underallocated when the actual cost exceeds the amount allocated: $800 − $700 = $100 underallocated. Thus, option a correctly identifies the classification.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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